# Capability-Guided Compression: Toward Interpretability-Aware Budget Allocation for Large Language Models

arXiv: https://arxiv.org/abs/2603.16440 · HTML: https://mlsanity.com/paper/2603.16440/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Placed in SAE features and their applications, one of 13 directions in Mechanistic interpretability.
- Builds on 16 of its 22 references that are in the map.
- First posted on arXiv 17 Mar 2026.

## Placed in

- Mechanistic interpretability / [SAE features and their applications](https://mlsanity.com/mechinterp/sae-features-and-their-applications/)

## Builds on (most cited first, 16 of 16)

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- [Pointer Sentinel Mixture Models](https://mlsanity.com/paper/1609.07843/) (2016)
- [GPTQ: Accurate Post-Training Quantization for Generative Pre-trained Transformers](https://mlsanity.com/paper/2210.17323/) (2022)
- [SmoothQuant: Accurate and Efficient Post-Training Quantization for Large Language Models](https://mlsanity.com/paper/2211.10438/) (2022)
- [AWQ: Activation-aware Weight Quantization for LLM Compression and Acceleration](https://mlsanity.com/paper/2306.00978/) (2023)
- [SparseGPT: Massive Language Models Can Be Accurately Pruned in One-Shot](https://mlsanity.com/paper/2301.00774/) (2023)
- [In-context Learning and Induction Heads](https://mlsanity.com/paper/2209.11895/) (2022)
- [A Simple and Effective Pruning Approach for Large Language Models](https://mlsanity.com/paper/2306.11695/) (2023)
- [LLM-Pruner: On the Structural Pruning of Large Language Models](https://mlsanity.com/paper/2305.11627/) (2023)
- [Scaling and evaluating sparse autoencoders](https://mlsanity.com/paper/2406.04093/) (2024)
- [ShortGPT: Layers in Large Language Models are More Redundant Than You Expect](https://mlsanity.com/paper/2403.03853/) (2024)
- [A Survey on Model Compression for Large Language Models](https://mlsanity.com/paper/2308.07633/) (2023)
- [Outlier Weighed Layerwise Sparsity (OWL): A Missing Secret Sauce for Pruning LLMs to High Sparsity](https://mlsanity.com/paper/2310.05175/) (2023)
- [RazorAttention: Efficient KV Cache Compression Through Retrieval Heads](https://mlsanity.com/paper/2407.15891/) (2024)
- [Explorations of Self-Repair in Language Models](https://mlsanity.com/paper/2402.15390/) (2024)

## Abstract (arXiv)

Large language model compression has made substantial progress through pruning, quantization, and low-rank decomposition, yet a fundamental limitation persists across all existing methods: compression budgets are allocated without any representation of what individual model components functionally encode. We term this the capability-blind compression problem and argue it is a root cause of two well-documented failures -- the insensitivity of perplexity-based evaluation to reasoning capability loss, and the abrupt phase transitions in model performance recently characterized by Ma et al. (2026). We propose Capability-Guided Compression (CGC), a framework that addresses this by using Sparse Autoencoder (SAE)-derived capability density maps to allocate differential compression budgets across transformer components. Capability density is a formally defined scalar measure combining the feature breadth, activation entropy, and cross-input consistency of a component's SAE feature activation distribution. We prove theoretically that components with higher capability density exhibit lower structural redundancy and reach their individual phase transition points at lower compression ratios, providing the first pre-compression mechanism for component-level phase transition prediction. Experiments on GPT-2 Medium confirm that capability density is statistically independent of Wanda importance scores (Spearman rho = -0.054, n = 384 heads), establishing it as a genuinely novel compression signal orthogonal to all existing importance metrics. We report a negative result on PPL-based compression comparison and provide a principled diagnosis identifying GPT-2 Medium as an insufficient test bed for the full CGC hypothesis. The theoretical framework, density formalism, and orthogonality finding constitute a foundation for capability-aware compression research.